If I make children authorized users on my credit card, will it help them?
Q. I would like to help my children with their credit. They are 14, 18 and 21. If I make this an authorized user on one of my cards, will that help them? Or what do you offer?
A. It’s great that you want to put your kids on the right track to building a good credit report.
But you need to consider what the move might mean for your own credit.
As long as you can control how they spend on the card, it can improve their credit, said Jody D’Agostini, certified financial planner at Equitable Advisors / The Falcon Financial Group in Morristown.
She said you would be responsible for the payments.
“You can also teach them great life skills like paying on time and living on a budget,” she said.
It’s also an opportunity to explain the pros and cons of a credit card versus a debit card, she said.
“A debit card is basically a cash payment, whereas a credit card borrows money to pay for something with accrued interest if it is not paid on time,” she said. “It helps to show them how quickly interest can add up if it’s not paid on time. “
Another way to start construction lending is to co-sign a car loan or lease or your first apartment, D’Agostini said. However, you need to make sure that they are mature enough to pay on time. Otherwise, your credit could be compromised, she said.
“These finance lessons should start at an early age to teach smart financial skills like saving 10-15% of your income and setting aside more than what you earn,” she said. “They can learn the value of paying bills on time and not maintaining a large balance on credit cards.”
D’Agostini said it is difficult to build credit before the age of 18, but there is a more recent option.
“They can put a cell phone, utility or Internet provider on their behalf and request that it be reported to the credit bureaus,” she said. “Payment history will now be reported to credit bureaus to help them build up their credit. “
Again, it should be emphasized that they will have to pay the bill on time. Setting up direct debits from their checking account can make that easier, she said.
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Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.com‘s weekly electronic newsletter.